Google falls to earth

Google (GOOG) blamed a slowdown in its fourth-quarter growth on its difficulty selling ads on social networking sites. The company delivers online ads for about 20 social networking sites, including MySpace (NWS). “I don’t think we have the killer best way to advertise social networking,” said Sergey Brin during a conference call with analysts Thursday. “Some of the things we were working on in Q4 didn’t pan out. There were some disappointments there.”

Google is the latest tech company struggling to stay ahead of consumer spending and behavior during an economic slowdown. EBay (EBAY), Apple (AAPL), and Yahoo (YHOO) reported projections that underwhelmed Wall Street in the past week. Google does not give sales or profit guidance, but its fourth-quarter numbers gave reason to make tech investors a bit nervous. Google has already wiped out nearly $73 billion off its November market cap, when shares hit a high of $747. By mid-day Friday, the stock was trading at $521.

The Mountain-View, Calif.-based company made $4.43 a share for the fourth quarter, which was a penny short of analysts’ consensus. Google raked in a $1.2 billion profit for the quarter, up 17% from a year ago. Sales, minus the money the company shares with its ad partners, came in at $3.39 billion, up 52 percent from the previous period a year ago. The Street had anticipated $3.45 billion and Google’s shares dropped more than 7 percent in after-hours trading to $516.20.

Not that all of this came as a big surprise. “Our expectations were a bit muted going into the quarter,” said Christa Quarles of Thomas Weisel. “But, this is still a company that grew 52 percent a quarter.”

Along with the discovery that fans of social networking sites have a low propensity to click on ads, Google was challenged by a decline in advertising spending in financial and travel businesses. Chief Financial Officer George Reyes said the slowdown was “seasonal” due to the holiday period last quarter.

Meanwhile, the growth rate of paid clicks for AdSense, which displays ads on sites outside of the Google homepage, has slowed. Paid clicks increased 30 percent compared to a 45 percent growth rate from the same period a year ago. AdSense, which made up 34 percent of total revenue, raked in $1.64 billion.

Google’s performance is a telling sign of how consumers use the Internet, and thereby gives some indication of how the Internet industry is faring. Analysts, naturally, tried to bait Google chief Eric Schmidt into giving some guidance for 2008. Schmidt, who acted like an air traffic controller by directing which of the five other Google execs answered questions on the hour-long call, didn’t budge.

When one analyst asked about potential outlook during a “weaker economy,” Schmidt quipped, “We’re not going to talk about the current quarter. We’re talking about the past quarter. We haven’t seen any negative impacts with rumors of future recessions.”

Real or not, Google has proven that it’s not immune to an economic downturn. While Jonathan Rosenberg, who runs Google’s product management team, painted a cheery picture of bargain-hunting consumers clicking on ads during a recession, some feel that’s not enough.

Google is banking a lot of the extra revenue to come from DoubleClick, the ad serving company it bought for $3.1 billion last year. Google can’t close the deal until the European Commission approves the merger. A ruling is expected by April 2. Said Schmidt, “We’re hopeful that it’ll clear.”

Francisco Antonio Cerón García

The main question: What would be your next strategy step to continue developing Internet in a new radical way?
It is a way in the sense of “meta”, like Google is a “meta internet”. Do we know how to do it?
A silicon valley is essentially 90% about the people and 10% about the place. Places close to financial centres and developed cities are more likely to host the next silicon valley, but smart people can turn any place into a silicon valley if that’s what they want, even if it’s in the middle of nowhere. However, now with the Internet I believe less in silicon valleys. I mean, what’s the point of having silicon valleys when entrepreneurs and techies can network through the Net and telecommute? As everyday real life contact becomes less necessary to conduct business, we will soon start seeing the genesis of ‘virtual’ silicon valleys leveraging the power of the Internet. If Ihad to build the next silicon valley, I would start by recruiting smart people on the Internet and creating incentives for like-minded individuals and companies to participate in some sort of hub website virtual marketplace

It makes me think carefully about the next big revolutionary step on internet development. Eventually, I think that the issue that is being treated here is a key issue and it deserves a new blog to be opened for it.
Generally speaking, this is the great step that could completely change our world as far as we know it now, like when computers were created and developed or just like Google, and it is all this tiny but huge things that have been changing our way of living and the way we understand life.
This is an open question, and I want that it would be the spirit of this simple blog!
You are all invited to build the meta internet!
Then you could start thinking a lot about this issue!

Meta

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